Lexus Likely To Lose Crown As Top Luxury Brand In U.S.

Lexus cars haven’t kept pace this year with rivals from BMW and Mercedes-Benz.

NAGOYA, Japan—The head of Toyota Motor Corp.’s Lexus brand said global sales of the upscale vehicles will likely fall short of last year’s total, with the brand set to lose its long-held status as the top-selling luxury car in the U.S.

“We would have ended up at the same level as last year, but now we’re probably going to be short,” Lexus marketing and product planning general manager Karl Schlicht said in an interview.

He blamed the likely fall on a combination of natural disasters in Japan and Thailand, a stronger yen against the dollar and tougher competition in the luxury market.

On Wednesday, Toyota said it would extend production cutbacks through Nov. 12 at several North American plants due to parts shortages from its Thailand operations.

Last month, its U.S. Lexus Division’s sales fell 14% from a year ago to 18,092 vehicles. Through Oct. 31, total U.S. Lexus sales were 153,739, down 16% from the same period a year ago, In contrast, BMW AG sold 246,888 vehicles in the same 10-month period.

Mr. Schlicht, the first non-Japanese manager to run Lexus, acknowledged the division is likely to relinquish its longtime position as the top-selling luxury brand in the U.S.

“To be honest, the competition has gotten stronger, but I don’t think it’s fair to say we lost the crown this year just because of that,” he said, noting production lost due to Japan’s March earthquake and the current flooding in Thailand.

Mr. Schlicht said there are no plans to move production of Lexus vehicles from Japan to markets such as the U.S. to cope with the yen’s surge to recent all-time highs.

But he indicated that could happen eventually if the Japanese currency stabilizes at the current elevated levels or strengthens further.

“Clearly [Toyota] management understands that if this persists or gets worse we may have to move some production” offshore, he said.

Currently, all Lexus models are made in Japan with the exception of some RX crossover sport-utility vehicles sold in North America, which are produced in Ontario, Canada.

A higher yen erodes the value of dollar-denominated profits and makes Japanese exports less competitive overseas.

Mr. Schlicht said the fall from No. 1 in the U.S. will give Lexus some “breathing space” to prepare for new cars, such as a remodeled GS midsize sedan, noting the brand hasn’t introduced a full-size sedan since 2007.

“In some ways, it’s kind of a relief that allows us to change the brand direction a bit and refocus on the next generation of cars without having that heavy burden” of being the luxury sales leader in the U.S., Mr. Schlicht said.

The GS, due in showrooms in February, will showcase edgier styling—such as a new front grille with spindles—and a sporty ride, which Toyota hopes will help the brand appeal to younger drivers.

Noting that the average age of Lexus buyers is older than competing brands globally, Mr. Schlicht said the brand is positioning itself to broaden sales beyond the baby boomers that have been its traditional core demographic.

“We’re trying to target a different kind of buyer to prepare for the next generation,” he said.

While the U.S. is by far the biggest market for Lexus, Mr. Schlicht said that he is encouraged by positive sales trends in China, Europe and Japan.

He noted that the new CT hybrid compact has done well in Europe and Japan, and said China was on track for a record year before the natural disasters disrupted supply.

Last year, Lexus sold 53,000 vehicles in China, 33,000 in Japan and 31,000 in Europe—its top three markets outside of the U.S.

Mr. Schlicht also said Lexus needs to broaden its lineup with more sporty two-door vehicles and hinted a successor to the discontinued SC coupe may be on display at the North American International Auto Show in January.

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